How Does A Short Sale Work?
In the wake of the financial crisis and the housing slump, it's no surprise that homeowners and banks alike are seeking a way to avoid massive foreclosures with homes that will simply sit unsold after the tenant is evicted. One of the most commonly used solutions that has emerged is a short sale. Mortgage holders prefer short sales because they don't have the same impact as a foreclosure. Banks prefer them because the home does not sit unsold and they are able to immediately recoup some of the costs. But what are they? How do they work? Understanding the typical process is key to deciding whether it might be a good option for you, but only a lawyer can advise you on how to proceed given your specific situation.
An Agreement To Sell A Home For Less Than The Mortgage
At the core, short sale homes are valued or saleable for less than is currently owed on the mortgage. The homeowner cannot continue shouldering the burden of the cost each month, but if the bank were to foreclose, they wouldn't likely be able to sell the house at the formerly agreed-upon price and they'd thus be out some of the money anyway.
The solution is to sell the home, but to do so for a lower price than what is currently owed on the home. This makes the overall transaction more complicated, but it can allow for substantially more flexibility in terms of pricing. The first step is to approach the bank about the prospect of adjusting a transaction. In order to eventually close the deal, the lender will need to have final approval over the price. There are more complex details involved, but they will typically be negotiated on a case-by-case basis between you and the lender.
What The Process Looks Like To The Buyer
When a buyer first looks at a home that is to be sold in this way, they won't know that there is any particular difference between it and one that is available for a conventional sale. The main difference that they will see involves the offer process. Any offer that they make must be approved not only by the seller, but also by the lender. Typically the seller is free to apply any proceeds from the sale toward their mortgage, covering it completely and then keeping any extra to put toward another purchase, save, or otherwise dispose of as they wish. But in this case, there won't be any profit; in fact, the current balance cannot even be covered by the proceeds. Thus, the lender must be involved as well.
The big benefit here is that foreclosure proceedings do not have to be initiated, which saves the bank trouble and the owner hassle and potential credit damage. If this is something that might be interesting for you, you should check with a lawyer and then speak with the issuer of your loan.
An Agreement To Sell A Home For Less Than The Mortgage
At the core, short sale homes are valued or saleable for less than is currently owed on the mortgage. The homeowner cannot continue shouldering the burden of the cost each month, but if the bank were to foreclose, they wouldn't likely be able to sell the house at the formerly agreed-upon price and they'd thus be out some of the money anyway.
The solution is to sell the home, but to do so for a lower price than what is currently owed on the home. This makes the overall transaction more complicated, but it can allow for substantially more flexibility in terms of pricing. The first step is to approach the bank about the prospect of adjusting a transaction. In order to eventually close the deal, the lender will need to have final approval over the price. There are more complex details involved, but they will typically be negotiated on a case-by-case basis between you and the lender.
What The Process Looks Like To The Buyer
When a buyer first looks at a home that is to be sold in this way, they won't know that there is any particular difference between it and one that is available for a conventional sale. The main difference that they will see involves the offer process. Any offer that they make must be approved not only by the seller, but also by the lender. Typically the seller is free to apply any proceeds from the sale toward their mortgage, covering it completely and then keeping any extra to put toward another purchase, save, or otherwise dispose of as they wish. But in this case, there won't be any profit; in fact, the current balance cannot even be covered by the proceeds. Thus, the lender must be involved as well.
The big benefit here is that foreclosure proceedings do not have to be initiated, which saves the bank trouble and the owner hassle and potential credit damage. If this is something that might be interesting for you, you should check with a lawyer and then speak with the issuer of your loan.
